Glossary

At Small Business Treasures we would like to give you the opportunity to have access to the most up to date information on owning and running a Small Business. For that reason we have supplied a list of terms and their meanings for those moments you get stuck wondering “what did they mean by that?”.

Small Business Glossary

  • Account: – record of all credit and debit transactions relating to a small business over a specified time frame.
  • Accounting: – the practice of  preparing reports on the financial activities of a small business.
  • Accounts Receivable: – money owed to a small business from its clients that is shown as an asset on the balance sheet.
  • Action Plan: – a schedule of activities to achieve goals and objectives.
  • Administration: – overseeing the operations of your small business.
  • Advertising: – informing potential customers of the features and benefits of your product or service allowing them the best informed opportunity to purchase from you.
  • After Sales Service: – may be advice, maintenance or the sale of spare parts that was stipulated during the terms of the original sale.
  • Agent: – a person that acts on the behalf of another with the means to transact business with a third party.
  • Appreciation: – the increase in value of property or goods.
  • Articles of Association: – a document stating the relationship with stakeholders of a registered company.
  • Assets: – all items owned by the business, these items may be physical or tangible.
  • Audit: – An examination of the records and procedures of a small business.
  • Australian Business Number (ABN): – your business identifier for your dealings with Government departments.
  • Bad depts: – dept that are unlikely to ever be paid. These depts are written off against profits.
  • Balance Sheet: – a summary of what your small business owes and what it owns on any specified date.
  • Bank Reconciliation: – comparison of the deposits and withdrawals on your business bank statement with actual receipts and payments.
  • Bankruptcy: – an insolvent person that the law recognizes as being unable to pay off their depts.
  • Batching: – producing a predetermined number of items at a time.
  • Benchmarking: – identifying the best processors used by your competitors in order to improve the performance of your small business.
  • Benefit: – a description of how the features of a product/service will be advantageous in the eyes of your customer.
  • Bookkeeping: – compiling a formal record of receipts and expenditures relating to your business.
  • Brand: – a registered name or mark that identifies your product or service.
  • Break even point: – the point where your sales equal the total costs without a profit or loss. Calculated by dividing the fixed costs by the contribution margin when this margin equals the total sales minus the variable costs divided by the total sales.
  • Broker: – an agent who buys and sells goods and services for another person on a commission basis.
  • Budgeting: – the process of estimating income and expenditure. A budget provides both a plan and a means of comparison of performance.
  • Business deductions: – allowable expenses accrued during the operation of your small business.
  • Business name: – the name under which your business operates.
  • Business Plan: – a document designed to arrange relevant details so that they become a planning tool to achieve and objectives of a business over a given time frame.
  • Capital: –  includes borrowings and all funds invested in a business.
  • Cash flow: – all money that comes into your business from sales and receipts and money going out of a business as cash payments.
  • Cash flow forecasting: – projecting income and outgoings of a set period for the purpose of providing adequate funding to pay expenses when they fall due.
  • Cash on delivery (COD): – money payable on delivery of  goods to a customer.
  • Central Business District (CBD): – the commercial hub of a city or township.
  • Commercial hire purchase: – when a finance company advances the price of an asset less the deposit in the form of a cheque made out to the supplier under an arrangement of terms and conditions. The amount owed and interest is then repaid in equal installments over a specified period of time.
  • Commission: – an amount of money paid to an agent for the selling of goods or services on behalf of a client.
  • Communication: – the exchange of information through speech, writing or signs.
  • Company: – a structure formed when a group of people or firms combine as shareholders and incorporate under the companies act.
  • Competitive advantage: – differentiating a product or service that you provide from those provided by your competitors.
  • Competitor: – any other small business offering the same or similar products or services that you provide to the customers you are targeting.
  • Consumer price index: – a quarterly measurement of movements in the price of a set of goods/services, which is published by the Commonwealth Government.
  • Consumer Protection: – this is provided by the trade practices act to safeguard the Australian consumer from false and misleading claims.
  • Contingency plan: – a plan to deal with possible future events that could impact on your small business.
  • Contract: – a legally enforceable agreement between two or more parties.
  • Copyright: – the right to reproduce material, such as written or musical works, audio or video recordings. The owner of the copyright is the person who produced the material unless it was produced by an employee in their line of work, the copyright is then held by the employer. It is an offense to use any material under copyright without consent.
  • Credit card: – allows the owner to purchase goods and services on credit through a financial institution.
  • Creditor: – an individual or business to whom you or your small business owes money.
  • Customer: – a person or business that has purchased a product or service from your business.
  • Customer profiling: – a description of potential customers in terms of their needs and wants and their ability to pay for them.
  • Customer service: – the behavior of the owners and staff of a business that facilitate a customers appreciation and approval of the product/service.
  • Debenture: – a certificate acknowledging a dept.
  • Dept: – money owed by your small business.
  • Debtor: – an individual or business owing money to another individual or business.
  • Decision making: – selecting between possible alternative actions.
  • Demographic: – population variables such as size, occupation, socioeconomic status, distribution, salary etc.
  • Depreciation: – an estimate of the monetary value of the wear and tear on plant and equipment used in your small business.
  • Direct costs: – the sum of the costs of materials and /or labour in producing/providing a product/service.
  • Direct response marketing: – dealing directly with a target market in order to elicit a immediate response to a promotion, eg; mail ordering.
  • Discount: – an amount or percentage deducted from the usual price of your product/service.
  • Distribution: – a planned and orderly system of dispersing goods from your small business to the customer.
  • Drawings: – money withdrawn from a business by the owner for personal use.
  • Duty: – the tax charged on the import, export, sale or manufacture of goods.
  • Economy: –  the state of the resources of a designated population
  • Efficiency: – the best way to complete a task in terms of productivity.
  • Email: – a method of sending messages via the internet. Should be used in the promotion of your products/services.
  • Enterprise: – is a business or other commercial activity.
  • Entity: – means an individual, a body corporate, a corporation or a partnership, a trust or a superannuation fund.
  • Entrepreneur: – an individual who can project an idea into the future and make it happen through action.
  • Equity: – the amount that your assets exceed your liabilities.
  • Equity finance: – money invested in a business in return for a share of ownership in the business. These include private investors, venture capital and strategic alliances.
  • Factoring: – the sale of the invoices of a business at a discount to a agent, who advances up to 80% of their value and takes over their collection. The remaining 20% is paid to the business owner less a fee when the agent receives the customers payment.
  • Feasibility study: – an analysis of the possibility of establishing a viable business.
  • Feature: – a measurable and positive attribute of a product/service.
  • Finance: – the provision of funds, equity finance or debt finance.
  • Fixed assets: – items purchased by the small business for long term use.
  • Fixed costs: – remain constant irrespective of fluctuations in sales. eg; rent, interest on loans.
  • Forecasting: – estimating and anticipating current and future events based on your best information available at the time.
  • Franchise: – an arrangement by contract allowing a business to trade under a recognized company. Expertise and assistance in management and marketing is provided in exchange for royalties.
  • Geographic Segmentation: – the analysis of geographic locations which can assist in market segmentation.
  • Goal: – an aim or target that directs action.
  • Goodwill: – an intangible asset, claimed on the sale of a business on the basis of existing customers, positive image and reputation.
  • Gross profit: – the difference between the receipts from sales and the cost of sales for a given period.
  • Gross profit margin: – calculated by dividing the gross profit by sales.
  • Home based business: – a small business conducted from your home.
  • Image: – an impression created in the mind of your customers about your small business.
  • Invoice: – a document notifying an obligation to pay.
  • Insurance: – payment of a premium to an insurance company for the protection of an individual or business against financial loss.
  • Intangible assets: – assets such as goodwill, patents and copyright.
  • Internet: – a network of telecommunications from around the world that can be assessed through a computer.
  • Inventory: – list of stock held, including value and number.
  • Inventory turnover: – the measure at which stock turns over or sells out during a year.
  • Investment: – when you use money to make money.
  • Leadership: – the ability to guide others to a common goal.
  • Lease: – a contract conveying property between an owner and another party for a specified time in exchange for regular payments. Depreciation con not be claimed.
  • Ledger: – a record of the day to day financial transactions of a small business.
  • Liabilities: – an amount of money owed by a business to anybody other then the small business owners.
  • Liquid assets: – cash or assets which can readily be converted into cash.
  • Liquidity: – the availability of cash or assets to finance any necessary expenditure.
  • Long term loan: – a loan that does not have to be repaid within five years.
  • Mail order: – a method of direct marketing through the post.
  • Maintenance plan: – the process to maintain buildings, machinery and equipment in order to avoid breakdowns and therefore interruptions to the running of your small business.
  • Management: – controlling human ,physical and financial resources in a business.
  • Margin: – the part of the selling price that is left after the actual costs of the product have been deducted.
  • Mark-up: – the amount added to the cost price of a product to determine the selling price.
  • Market niche: – a segment of a market suitable for your small business venture.
  • Market research: – gathering and analyzing information in order to make the right decisions.
  • Market segmentation: – dividing a market into distinguishable segments in order to identify customer profiles.
  • Marketing: – the process of identifying the needs and demands of potential customers, in order to provide them with their desired products /services.
  • Marketing mix: – the measures that a small business utilizes to market its products/services to customers. Product, price, promotion and place.
  • Mortgage: – the conveyance of property as security for a dept.
  • Net assets: – the combined amount of fixed assets and working capital of a small business.
  • Net profits: – the difference between the gross profits and the total expenses for a period of time.
  • Net profit margin: – reflects profitability after the operating costs have been deducted from the gross profit. It is an indication of the overall efficiency of small business management.
  • Networks:– groups of individuals who exchange ideas and information.
  • Objective: – a step towards a goal which should be measurable and stated within a time frame.
  • Occupational Health and Safety: – a code of practice that is to be managed and addressed by employers for the protection of employees.
  • Operations: – procedures necessary for the day to day running of your small business.
  • Outsourcing: – the buying in of components, finished products or services from outside suppliers, rather then providing them from within the business.
  • Overdraft: – the overdrawing of money in excess on the credit balance in your small business bank account.
  • Overheads: – costs that are not directly related to the formation of your products/services, such as rates, distribution and promotional.
  • Owners equity: – the balance of money invested by the owner after all liabilities have been deducted.
  • Packaging: – the presentation of a product.
  • Partnership: – the relationship that exists between 2-20 persons carrying on a small business with a view to profit.
  • Patent: – the registration of an invention. This gives the right of the person or business to sell the product in the country of registration.
  • Personal assets: – assets not tied in any way to your business.
  • Personnel: – people employed in your small business.
  • Petty cash: – a cash fund kept for small expenses on a day to day basis.
  • Planning: – the process you would use to develop goals and objectives and listing strategies to achieve them.
  • Policies: – a document containing a plan of action to deal with current and future business events.
  • Positioning: – strategies used to gain a competitive advantage.
  • Price: – the sum of money of which your products/services can be brought or sold.
  • Pricing: – placing a value on a product or service.
  • Prioritising: – ranking your activities in an order of importance.
  • Private investors: – individuals recommended or known to the you. In return they will expect a share  of profits made by your small business.
  • Procedures: – guidelines that you follow to achieve a specified result.
  • Product: – an item offered for sale with or without associated services.
  • Product life cycle: – the identifiable sales pattern over time for a particular product.
  • Product mix: – the whole range of products and services that your business offers for sale.
  • Profit and loss statement: – a financial record which summarises the activities of your small business over a period of time. The report consists of receipts and the expenditures incurred in obtaining those receipts and the profit or loss resulting from the activity.
  • Profitability: – the return on capital invested.
  • Promotion: – a technique used to increase awareness of potential customers about your product/service.
  • Public relations: – the process of promoting good will among the general public in order to present a positive image of your small business.
  • Publicity: – information used to attract public attention through the media.
  • Quality control: – market standards demanded by your customers and the law.
  • Recruitment: – the search and selection of personnel for your small business.
  • Research: – the process of collecting and analyzing information for a purpose.
  • Retailing: – the process of selling directly to consumers.
  • Return on assets: – calculated by dividing the net profit by the total assets.
  • Service: – activities sold by a small business.
  • Shareholder: – an individual who holds a share in a business.
  • Small business: – any business holding a maximum staff of up to 100 employees.
  • Sole trader: – a person that trades as an individual in business.
  • Standards: – an accepted example of criteria of which others are judged.
  • Start-up costs: – all the expenses incurred when setting up a small business.
  • Stock: – goods kept on hand by a business for sale to customers.
  • Stocktaking: – the recording of the value of stock on hand at any given time.
  • Strategic alliance: – the formation of a partnership with another business, this could be structured with suppliers or customers to reduce expenditure.
  • Strategic planning: – the process to determine how best to achieve the goals and objectives of the small business.
  • Superannuation: – money set aside during your working life to provide for financial requirements during retirement.
  • Supplier: – a producer and/or distributor of a product or service.
  • Sales: – transactions such as goods and services sold in your small business.
  • Swot analysis: – an analysis of a business in order to determine its strengths and weaknesses and to identify and assess potential opportunities and threats in the marketplace.
  • Target market: – the group of people identified to be most interested in your product/service.
  • Tender: – a formal offer of sale of specified goods or services at a fixed rate.
  • Time management: – the prioritising of activities within a given time frame in order to maximise the use of your time.
  • Trademark: – a registered mark that indicates a connection between a product/service and a person or business.
  • Turnover: – the rate at which the stock in your small business is sold or replenished.
  • Variable costs: – costs which fluctuate in proportion with changes in the level of business activity.
  • Viability: – the stage of development reached in a business which allows profitable and continual operation.
  • Warranty: – the commitment by a seller regarding the quality of the product or service. Under specified conditions if the product is faulty it will be replaced or repaired or the purchase price reimbursed.
  • Wholesaling: – purchasing products from produces then on selling them to retailers.
  • Working capital: – the funds required to operate a business on a day to day basis.